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Service occupancy or tenancy

This content applies to England

How to distinguish between a service occupancy and a service tenancy.

It is important to distinguish between a service occupancy, where the occupier has little security of tenure, and a service tenancy or service licence, where the tenant's or licensee's rights will depend on the sort of tenancy or licence s/he has.

Service occupancy

A service occupancy (which is sometimes called a service licence) is a particular kind of licence that exists where an employee occupies accommodation in one of two ways:

  • where it is an express term of the employment contract that the employee lives at the property for the better performance of the employee's duties, or
  • where the occupation of the property is essential for the performance of the employee's duties.[1]

In the first case, living at the property can only be a genuine requirement of the employment if the required occupation enables the employee to better perform her/his duties.[2] An arbitrary term in a contract is not sufficient.[3] For the condition to be met, it is not necessary that the employee lives in the property because it is essential to her/his duties.[4] It is sufficient if the duties would be better performed by someone living on-site than anywhere else.[5]This condition would be met, for example, in the case of a police officer who is expressly obliged to occupy her/his accommodation so as to ensure that s/he is available where and when s/he is wanted.

The second case imposes a stricter test, and is only satisfied if the job cannot be performed unless the employee lives in the accommodation provided. It does not require a specific term in the contract of employment, as a term can be implied into the contract by the actual requirements of the job.[6]

For either test, the occupier can still be a service occupier if her/his occupation and employment do not start on the same day. This will be the case if the employment is the cause or reason for the occupation of the employer's property.[7] In addition, for either test, an occupier can move in and out of a service occupancy as her/his employment circumstances change. An occupier's status is not fixed in perpetuity.[8]

An occupier who has a service occupancy is called a service occupier. The security of tenure for service occupiers is explained on the page on Service occupiers.

Service tenancy

If the occupier does not have a service occupancy (where the occupation is neither required by the employer for the better performance of the employee's duties nor essential) and the occupation satisfies the normal requirements of a tenancy, then the employee is a service tenant. The security of tenure for service tenants is explained on the page on Service tenants. However, if the occupation does not satisfy the normal requirements of a tenancy, then the occupier has an ordinary licence.[9] For more information about licences and the normal requirements of a tenancy, see What is a tenancy? and What is a licence?.

[1] Northern Ireland Commissioner of Valuation v Fermanagh Protestant Board of Education [1969] 1 WLR 1708, HL.

[2] Wragg v Surrey CC [2008] EWCA Civ 19.

[3] Gray v Holmes [1949] 30 TC 467.

[4] Coleman v Ipswich BC [2001] EWCA Civ. 852, CA.

[5] Surrey CC v Lamond (1998) 31 HLR 1051, CA.

[6] Smith v Seghill Overseers [1875] LR 10 QB 422; Glasgow Corporation v Johnstone [1965] 2 WLR 657, HL.

[7] Norris v Checksfield (1991) 23 HLR 425, CA.

[8] Elvidge v Coventry CC (1993) 26 HLR 281, CA.

[9] Torbett v Faulkner [1952] 2 TLR 659 CA.

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